Health insurance

A new law may finally give some small businesses the incentive
to purchase at least some type of health insurance for their
workers.

The legislation, signed by Gov. Jan Brewer, provides companies a
dollar-for-dollar tax credit, up to $360 a year, toward the
purchase of high-deductible coverage. And there’s another $360
credit for contributions made to each worker’s health savings
account.

Rep. Steve Court, R-Mesa, said he hopes the credits, while
small, will be just enough to convince small employers — those with
between two and 50 workers — to provide at least some health
insurance to their workers.

But that financial relief is only temporary, with companies able
to claim the credits for only three years.

Court said, though, that may be all that is necessary. He
pointed out that, unless changed or overturned, the new federal
health care law is supposed to take effect in 2014.

The change has the support of the National Federation of
Independent Business. Farrell Quinlan, the organization’s state
director, said the bottom line for business owners is
financial.

“As with any benefit, especially one that for small businesses
is optional, costs are brought into play,” he said.

“A marginal impact on cost, to the benefit or the worst, will
have an impact on that decision-making process,” Quinlan continued.
“We believe these incentives will help provide probably one of the
lowest-cost health care options.”

The starting point is the concept of a high-deductible policy.
In essence, it provides coverage for catastrophic incidents above a
certain cost, with individuals responsible both for day-to-day
medical expenses as well as some initial costs of a hospital
stay.

Quinlan said even these policies, which are much cheaper than
standard group health insurance, are still unaffordable for many
small companies. Providing a $360 state tax credit — essentially
letting the company pay the money toward insurance instead of
toward the state — might be just enough to convince firms to
provide coverage.

But that is just part of the equation.

Employers also would need to set up health savings accounts for
their workers.

What’s behind this is the idea that individuals decide at the
beginning of each benefit year how much they want set aside for
anticipated medical expenses. Aside from forcing workers to save,
any dollars put into these accounts are exempt from federal and
state income taxes.

Here, too, a tax credit would be available, up to $360, if the
company provides some match of worker contributions.

Those credits, however, do reduce state revenues. A report
prepared by legislative budget staffers pegged the price tag at $33
million.

Court acknowledged that essentially amounts to the state
subsidizing companies to offer a benefit to their workers. But he
said it makes sense, especially as there is no legal requirement
for employers to provide health insurance at all.

Anyway, he said, there would be savings elsewhere.

“If somebody is not insured now and they’re showing up at the
emergency room, it’s costing a lot more” than if they had simply
gone to a doctor, costs Court said ultimately are borne by
everyone.

He also pointed out that the new law is kicking in just as the
state is scaling back eligibility for the Arizona Health Care Cost
Containment System, the state’s Medicaid program.

The current program provides free care for everyone below the
federal poverty level, about $18,500 a year for a family of three.
The change, approved by lawmakers, will halt enrollment of all
childless adults, regardless of income, and put a lower income
limit on adults with children.

That cost to the state, however, presumes the incentives in the
law will result in many businesses without health insurance
deciding to start offering coverage. But the analysis by
legislative budget staffers said that is a questionable
assumption.

According to that report, the Kaiser Foundation finds that the
average cost to employers of a high-deductible policy is $3,789 for
single workers and $8,225 for families.

“A $360 credit seems unlikely to induce many businesses to make
an investment of this size,” the report states.

The other issue is that three-year limit on being able to claim
the credit. Court acknowledged nothing in the law requires
employers to keep providing coverage once the state subsidy runs
out.

“It’s something designed to get them off the dime and get some
coverage,” he said. Anyway, Court said, it may provide at least a
bridge until the federal health care law kicks in with its own
mandates on insurance coverage.